Legislative Analyst’s Office Releases California’s Fiscal Outlook for the 2023-24 State Budget – California Could Face a $25 Billion Deficit

The 2023-24 Budget California's Fiscal Outlook by LAO

By Teresa Anderson, Public Policy Director, The Arc/UCP California Collaboration

The Legislative Analyst’s Office (LAO) has provided fiscal and policy advice to the Legislature for 75 years. It is known for its fiscal and programmatic expertise and nonpartisan analyses of the state budget. Forecasting state revenues and expenditures is one of the many important functions of the LAO. Recently the LAO release the state budget forecast indicating that the state faces a $25 Billion dollar budget deficit, not adjusted for inflation, as well as ongoing deficits. Due to the fiscal uncertainty the LAO is recommending the Legislature identify recent budget augmentations that have not been distributed and consider pausing or delaying distribution. The report gives cause for concern in that the LAO points to provider rate adjustments and the effects of inflation stating, “In the Department of Developmental Services (DDS), although the Legislature recently enacted a plan to support rate models developed in a 2019 study (and updated to 2021-22 levels), under current law, providers would only receive rate adjustments based on future legislative decisions.”  The brief discusses the impact to state programs under both circumstances of whether the state automatically accounts for inflation or not and highlights the fact that there is significant variation in the mechanism used by the state to adjust for inflation such that some areas of the budget automatically adjust for inflation while others do not. The LAO Brief Considering Inflation’s Effects on State Programs can be read here: https://lao.ca.gov/reports/2022/4647/Inflation-Effects-on-State-Programs-111622.pdf

The full forecast can be read here: https://lao.ca.gov/reports/2022/4646/CA-Fiscal-Outlook-111622.pdf


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